Peer-to-Peer Lending Explained

Peer to peer lending is where an investor loans to an individual or business through an online service that matches lenders with borrowers. Another popular term for peer to peer lending is “crowdfunding”, which uses a digital platform to unite investors with borrowers, while charging a fee to the borrower for their services. A peer to peer loan is not guaranteed by any government institution and is mainly unsecured, although in some business agreements, the borrower will put assets up as collateral for the loan.

Peer-to-Peer Lending

Debt Consolidation

Using such a peer to peer platform, it is possible for a lender to agree to a debt consolidation loan, which is used to pay all the borrower’s outstanding debts. There are even debt consolidation loans for bad credit‌‌‌‌ borrowers, which could be the solution to the problem of mounting multiple debts. If, for example, a person has 3 or 4 loans that require monthly payments that fall on different dates and they are finding it difficult to make ends meet, debt consolidation might just be the ideal solution.

The Benefits of Peer to Peer Lending

It is often the case where the
agreement involves a lower interest rate than a typical bank loan, as the
lender does not have the massive overheads of the bank, and when looking to
borrow money, it is important to get the lowest rate of interest. Traditional
lending institutions tend to take their time when considering loan applications
and no amount of pressure will shorten this, whereas the peer to peer lender
will often give the applicant an answer within minutes rather than days or
weeks.

Bad Credit Scores

Peer to peer lenders are not as rigid
as the traditional banking sector, and they will often take each application on
its merits, which could mean they are prepared to overlook a less than perfect
credit score. If you would like to apply for a peer to peer loan, an online search will lead you to an
established provider, and with the third party’s expert advice, you can be sure
to make the right decisions regarding the type of loan you are looking for.

There are many reasons why a person might wish to take out a peer to peer loan – it could be to consolidate multiple debts, paying for further education, home improvements or even to launch a business. The company that provides the platform for lenders and borrowers to carry out transactions would take a commission from the borrower when the loan is agreed, and for people from all walks of life, peer to peer lending is the ideal solution, as it can be handled online and with minimum of inconvenience to both borrower and lender.

If you would like to take out a
personal loan for any reason, there are online peer to peer lending
organisations that can arrange for the perfect loan package, and they can be
found with a Google search. Fast approval and a minimal amount of paperwork are
both the norm with online loan facilitators, and in no time, you can have the
loan you so desperately need.

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ProFinance Blog is a personal finance blog dedicated to people who want to take control of their finances and secure their future. Here you will find personal stories to inspire you to make better and more informed financial decisions. We aim to help people understand personal finances better and meet the challenge of living comfortably within the budget.